If you own your home, it is most likely your greatest
single asset. That is why it is important to be careful
when agreeing to a home equity loan.
Homeowners--particularly elderly, minority, and those
with low incomes or poor credit--should be careful when
borrowing money based on their home equity. Why? Certain
abusive or exploitative lenders target these borrowers,
who unwittingly may be putting their home on the line.

You can protect yourself from being a victim of loan
crooks by following these tips:

Ask specifically if credit insurance is required
as a condition of the loan, and shop around for the
best rates.

What is the interest rate? If it’s adjustable,
how much can it change, how often can it change and
is there a maximum?

What is the annual percentage rate (APR)? If the
APR is significantly higher than the stated interest
rate, something is seriously wrong.

Are there any annual fees, transaction, or loan
origination fees?

Is a complete list of all closing costs
supplied?

Do I need this money bad enough to risk losing
my house?

Be suspicious if lenders appear not to have a regular
place of business or those who actively solicit you -
especially if they have information about your personal
financial situation or hesitate to disclose all the
terms of the loan.

The major disadvantage of home equity financing is
your home is at risk if you can't make payments. Before
taking out a home equity loan, be sure to ask:

how large is the credit line?

how long is the term of the loan?

what's the minimum and maximum monthly payment?

what's the interest rate?

what's the annual percentage rate? (it shouldn't
be much higher than the stated interest rate.)